Is it crunch time for cobalt in coatings?

By Paul Smith, Catexel

In the summer of 2017¹, I wrote about growing concerns surrounding the availability and pricing of cobalt, and the potential impact on the coatings and composites industry. As a relatively minor user of cobalt derivatives, the increasing global competition for this sought-after resource left the coatings industry exposed to price fluctuations and pressure on profit margins. Add into the mix the health concerns surrounding cobalt salts and the ethical issues of the mining of cobalt in the Democratic Republic of Congo (DRC), and the coatings industry was faced with growing pressure to commit to going cobalt-free.

Six months later and the price of cobalt is hitting the headlines again with it reaching a ten year high of $35.61/lb². The forecasts are predicting the demand for cobalt will continue to rise in 2018, adding more stress to the balance of global supply and demand. So, what are the factors at play creating the latest surge in the price of cobalt?

Supply chain restructuring

With its high energy density and low thermal conductivity, cobalt is an important component of lithium-ion batteries and in a report from June 2017, Conaccord Genuity forecast that by 2025, 73% of cobalt would be used by the global battery market. Powered by lithium-ion batteries, the electric vehicle market is booming and in order to meet production requirements, vehicle manufacturers are looking for more efficient, reliable and cost-effective methods to guarantee their supply of cobalt.

The result has been electric vehicle manufacturers such as Mercedes Benz, Volvo, Volkswagen joining TESLA in seeking to arrange long term supply arrangements for cobalt directly with the miners and refiners, missing out the traditional trading houses. This has changed the supply landscape of cobalt forever and it’s at the expense of smaller, low volume cobalt users like the coatings and composites sector. In fact, the total use in metal soaps is now less than 3% of global demand for cobalt.

The immediate reaction to these shifts in the supply framework has been a price hike of 50% above its mid-December 2017 peak, climbing to over $35/lb and it is forecast to climb even higher as I predicted back in July 2017.

Sourcing an alternative

Considerations around ethical investments permeate the entire global economy and cobalt mining is just one of a number of cases where caution is recommended. A recent paper⁴ from London-based Hermes Investment, “Modern Slavery: the true cost of mining cobalt” sets out a comprehensive assessment of the current market conditions, supply chains and demand drivers highlighting the complexities involved in satisfying the global demand for cobalt.

Opportunities to fund and open new US mine developments continue to surface but realistically it could be more than five years before we start to feel any benefit, by which time, regulatory and other concerns around cobalt use in coatings and composites will have changed the demand landscape all over again.

A cobalt-free future for coatings?

For the coatings industry, a combination of regulatory concerns, limited cobalt availability and rising prices will underpin fundamental changes in the adoption of novel siccative solutions. The simultaneous resurgence of the sustainably sourced alkyd resins market means we can at last look forward to satisfying growing consumer demand for sustainable products without compromising performance.

Catexel remains committed to delivering cobalt alternatives for a more sustainable and cobalt-free future for the coatings and composite markets.

References:

1. http://www.european-coatings.com/Raw-materials-technologies/Raw-materials/Coatings-pigments/The-true-cost-of-not-going-cobalt-free
2. Cruz Cobalt: Cobalt Price per Pound reaches a New 10-year HIGH of $35.61! Multiple Cobalt Work Programs are Now Underway in North America! CUZ:TSX.v | BKTPF:USA | A2DMG8:Germany; Please see the link below to Cruz Cobalt Corp's fresh video content:http://www.investmentpitch.com/video/0_1pkqpo2u/Whats-Behind-the-Global-Demand-for-Cobalt
3. https://investingnews.com/daily/resource-investing/critical-metals-investing/cobalt-investing/cobalt-forecast/
4. https://www.hermes-investment.com/ukw/blog/perspective/modern-slavery-true-cost-cobalt-mining/

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Q&A: “The real quest isn’t being cobalt-free, it’s being cobalt-free without compromise”

European Coatings spoke to Paul Smith about the situation on the market and if a shift to cobalt-free coatings is possible.

The coatings industry only consume a small part of the global cobalt demand. How is the situation on the market currently?

Paul Smith: The majority of the global demand for cobalt is for the production of lithium-ion batteries. The use of cobalt in metal soaps, such as those used in coatings applications, is less than 3% of global demand and declining, despite the growth in coatings. This makes the coatings industry a tiny player in the cobalt market and as such will wield no influence over cobalt price, availability and growth dynamics.

For what applications is cobalt indispensable?

Smith: Cobalt (Co) soaps, or more accurately, cobalt carboxylates, is the collective description for a range of partially soluble compounds formed by cobalt in combination with a range of organic acids. These substances are used as a primary drier or siccative in alkyd resin-based paints that used to make up about 40% of the soaps market. They have traditionally been the mainstay in both decorative and functional coatings.

Is a shift to cobalt-free alternatives in any case possible?

Paul Smith

CEO Catexel

Smith: With the reclassification of cobalt-based alkyd curing catalysts highly likely, research is ongoing to find transition metal complexes that also boast improved safety and environmental profiles. In the last decade, Mn and Fe catalysts have been found to offer comparable drying activity to cobalt when delivered in combination with selected ligands. The change in cobalt pricing structure have accelerated the adoption and use of these compounds, offering cost competitivity and improved environmental profile. As paint compositions have previously been optimised 
for cobalt soaps, manufacturers now need to make some adaptions to ensure new Mn or Fe siccatives work in the most optimal manner. The real quest isn’t being cobalt-free, it’s being cobalt-free without compromise and new systems that can promote the highest possible performance in a commercially attainable, operationally viable, socially responsible way are the future.